Incentives, choice and accountability in the provision of public services

This paper discusses a theoretical framework to study the issues of competition and incentives without relying on the standard profit-oriented “market” model in the context of the debates about public service reform in the UK. It uses the idea that the production of public services coheres around a mission, and discusses how decentralized service provision can raise productivity by matching motivated workers to their preferred missions. Our focus on competition and incentives cuts across traditional debates about public versus private ownership and allows for the possibility of involving private non-profits. We also address concerns about the consequences of allowing more flexibility in mission design and competition on inequality.

Human Resource Management and Productivity

In this chapter we examine the relationship between Human Resource Management (HRM) and productivity. HRM includes incentive pay (individual and group) as well as many nonpay aspects of the employment relationship such as matching (hiring and firing) and work organization (e.g. teams, autonomy). We place HRM more generally within the literature on management practices and productivity. We start with some facts on levels and trends of both HRM and productivity and the main economic theories of HRM. We look at some of the determinants of HRM - risk, competition, ownership and regulation. The largest section analyses the impact of HRM on productivity emphasizing issues of methodology, data and results (from micro-econometric studies). We conclude briefly with suggestions of avenues for future frontier work.human resource management, productivity, personnel economics

Motivating knowledge agents : can incentive pay overcome social distance?

This paper studies the interaction of incentive pay and social distance in the dissemination of information. We analyse theoretically as well as empirically the e ect of incentive pay when agents have pro-social objectives, but also preferences over dealing with one social group relative to another. In a randomised eld experiment undertaken across 151 villages in South India, local agents were hired to spread information about a public health insurance programme. Relative to at pay, incentive pay improves knowledge transmission to households that are socially distant from the agent, but not to households similar to the agent

Rank Incentives, Social Tournaments, Feedback, Field Experiment

Performance rankings are a very common workplace management practice. Behavioral theories suggest that providing performance rankings to employees, even without pecuniary consequences, may directly shape effort due to the rank’s effect on self-image. In a three-year randomized control trial with full-time furniture salespeople (n=1754), I study the effect on sales performance in a two-by-two experimental design where I vary (i) whether to privately inform employees about their performance rank; and (ii)whether to give benchmarks, i.e. data on the current performance required to be in the top 10%, 25% and 50%. The salespeople’s compensation is only based on absolute performance via a high-powered commission scheme in which rankings convey no direct additional financial benefits. There are two important innovations in this experiment. First, prior to the start of the experiment all salespeople were told their performance ranking. Second, employees operate in a multi-tasking environment where they can sell multiple brands. There are four key results: First, removing rank feedback actually increases sales performance by 11%, or 1/10th of a standard deviation. Second, only men (not women) change their performance. Third, adding benchmarks to rank feedback significantly raises performance, but it is not significantly different from providing no feedback. Fourth, as predicted by the multi-tasking model, the treatment effect increases with the scope for effort substitution across furniture brands as employees switch their effort to other tasks when their rank is worse than expected

The indirect approach

Aid and conditionalities are the"carrots and sticks"of the conventional, direct approach to fostering economic development. The economic theory of agency is the most sophisticated treatment of the direct carrots-and-sticks approach to influencing human behavior. Considering the outcomes of the conventional approach, it might be worthwhile to explore alternative indirect approaches that focus on enabling clients to act more autonomously, rather than try for fuller control of clients'actions (or"agents"behaviors) with improved carrots and sticks. Are there inherent limitations in the direct approach that will not be addressed with better crafted"agency contracts"or closer monitoring of the agents? The author traces the intellectual history of indirect approaches from Socrates to modern thinkers, such as Wittgenstein, Gandhi, and McGregor. One theme of his survey is that constructivist and active-learning pedagogies constitute an indirect approach in which the teacher does not directly transmit knowledge to the learner, through training, and instruction. These pedagogies - translated into social and economic development as learning writ large - from the basis for an alternative indirect approach to fostering development. Actions have motives, just as beliefs have grounds, concludes the author. In the wide spectrum of human endeavor, there is only a fairly small"bandwidth"in which motives can be supplied by the carrots, and sticks of the direct approach (including agency theory, and market-driven activities as special cases of the direct approach to affecting behavior). Outside that spectrum, trying to use direct methods in a controlling manner, contradicts the motives for actions (and the grounds for beliefs) - like trying to"buy love."For higher activities, motives must come from within. Helpers can at best use an indirect approach to bring doers to the threshold; the doers have to do the rest, which makes the results their own.Public Health Promotion,Teaching and Learning,Curriculum&Instruction,Health Monitoring&Evaluation,Educational Sciences,Educational Sciences,Teaching and Learning,Health Monitoring&Evaluation,General Technology,Curriculum&Instruction